After I wake up, feed my yellow lab and check the internet for updates on Nebraska football, I do two things: 1) help small and medium business owners (especially manufacturers, architects, engineers, computer software and agriculture) keep more of their tax dollars as National Managing Director for alliantgroup; 2) help whistleblowers who want to speak out about fraud involving taxes and government spending at my law firm ZFFJ.
My hope is to comment on tax policy, cutting through the headlines to give business owners a clear sense of what is really going on in DC. I draw on nearly 18 years of government service – including 8 years as Tax Counsel for the Senate Finance Committee when we passed some of the largest tax bills in the history of the country (EGTRA, JEGTRA, Pension Protection Act, Jobs Act, etc.). I try to highlight tax laws and regulations – and especially overlooked provisions -- that can benefit business owners or have an unexpected bite.
That I am the only person who has both a BFA in Film Production and an LL.M. in Tax from NYU (as well as a JD from George Mason) hopefully comes through in my writing as I try to overcome one of the greatest writing challenges – bringing humor to tax.

9/22/2010 @ 12:33PM5,201 views

Small Business Bill -- What Do Business Owners Need to Know To Cut Their Taxes?

The House is on the verge of putting its final stamp on the small business tax bill (passed last week by the Senate) and sending it to the President for signature. The bill has several good tax relief provisions that can possibly translate into real dollars in the pockets of business owners. While I will focus on the tax provisions in the bill, readers should be aware that the bill also includes efforts to increase SBA lending and lending to small businesses by banks and other financial institutions.

Money in Your Pocket

Five-year carry-back for general business credits. Normally general business credits can only be carried back for one year (and forward 20 years). The new law will allow a five-year carry back. The carry back is available for small businesses (not publicly traded) that have averaged less than $50 million in gross receipts for the last three years. Partners/shareholders must meet the same test. The provision is effective for credits determined in the taxpayer’s first taxable year beginning after December 31, 2009 .

What are examples of general business credits? The Research and Development Tax Credit is the big one (there are several dozen) but others of note include: Work Opportunity Credit; Low Income Housing Credit; Disabled Access Credit; Empowerment Zone Hiring Credit; the Employer Provided Child Care Credit; and the ever popular Distilled Spirits Credit.

General business credits for small business not subject to alternative minimum tax. This is huge. I wrote about this provision earlier in some detail. A great number of small and medium businesses are making expenditures that would qualify for a general business credit such as the R&D Tax Credit. However, these businesses are effectively barred from taking most general business credits due to the AMT. In a nutshell – if the business owners are subject to the individual AMT it puts the kibosh on taking most general business credits.

The change in law ends this AMT bar for credits for tax year 2010 for businesses with average gross receipts of $50 million or less for the last three years (Note: small private C corporations also benefit from this change – not just pass-thru). Business owners need to be talking to their tax advisors to revisit whether they are now qualifying for general business credits because of this change in law. In my discussions with accounting firms – often 80% of their business clients cannot take advantage of the general business credits because of the AMT bar – are you one of them? If the answer is yes, you could be sending less money to Washington this year.

Tax Breaks for Purchases of Personal Property (and Some Real Property and Leaseholds)

Section 179 Expensing Expansion. Under current law, Section 179 has allowed small businesses to expense (i.e. deduct immediately rather than depreciate over time) $250,000 of qualifying property (basically tangible personal property and some software) placed in service the taxable year. The $250,000 expensing is phased out if the taxpayer has purchased more than $800,000 in qualifying property for that year.

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